Here are the stark, unvarnished facts about the Hovnanian Enterprises, one of the country's leading builders of luxury new homes:
What a difference a year makes - During the last three months, the company lost $57.3 million, or 91 cents a share. During the same period last year, the company turned a profit of $81.43 million, or $1.25 a share.
The past is catching up with the present – The company needs to make one time write-offs; $90 million related to operations in Fort Myers-Cape Coral, Florida, and $8 million in other markets.
No one wants those McMansions anymore – Net contracts for the quarter slipped 23 percent to 2,570, excluding 43 homes in joint ventures. Companywide, cancellations for the first quarter rose to 36 percent of gross contracts from 35 percent in the fourth quarter of 2006.
Incentives and price reductions are now eating into revenues- In the first quarter, revenue was $1.17 billion, down 8.8 percent from revenue of $1.28 billion in the same period a year ago.
The share price is down; way down – After the company reported the dismal first quarter performance, the shares fell 4.1 percent. Analysits were expecting some bad numbers, but the losses exceeded most expectations. More generally, HOV has proved to be a particularly dangerous stock to have in your portfolio. Just 12 months ago, the stock was trading at over $45 a share; now it has slipped below $30.
What a difference a year makes - During the last three months, the company lost $57.3 million, or 91 cents a share. During the same period last year, the company turned a profit of $81.43 million, or $1.25 a share.
The past is catching up with the present – The company needs to make one time write-offs; $90 million related to operations in Fort Myers-Cape Coral, Florida, and $8 million in other markets.
No one wants those McMansions anymore – Net contracts for the quarter slipped 23 percent to 2,570, excluding 43 homes in joint ventures. Companywide, cancellations for the first quarter rose to 36 percent of gross contracts from 35 percent in the fourth quarter of 2006.
Incentives and price reductions are now eating into revenues- In the first quarter, revenue was $1.17 billion, down 8.8 percent from revenue of $1.28 billion in the same period a year ago.
The share price is down; way down – After the company reported the dismal first quarter performance, the shares fell 4.1 percent. Analysits were expecting some bad numbers, but the losses exceeded most expectations. More generally, HOV has proved to be a particularly dangerous stock to have in your portfolio. Just 12 months ago, the stock was trading at over $45 a share; now it has slipped below $30.
And how exactly does CEO Ara Hovanian feel about the current market? “Our first quarter is always the slowest seasonal period for new contracts, so it is difficult to get a good feel for the strength of the market and what absorption rate to project for the rest of the year in each of our communities,” he said. “Most of our markets have begun to show signs of stabilization, but we are not yet confident that we have found the bottom of this housing slowdown.”
Hey! You've won a ride back to the top
7 comments:
Anonymous said...
LOL, so the share price is down from $45 to $30. That has gotta hurt.
Anonymous said...
Why were insiders selling so many shares in 2005 in early 2006?
If you go back to 2005 and 2006, you can see that there was an amazing amount of insider selling among executives at many of the publicly traded builders. Hundreds and Hundreds of millions of dollars worth of shares. Just 4 or 5 well know execs sold almost $1 Billion alone. In some cases, the value of the shares sold by a few insiders amounted to almost the entire market cap of the company just a few years back.
Then in 2005 and 2006 Managmenet started giving promising projections about the future. For many at the time, insiders began to observe the industry was beginning to slow in 2005. As a result, a number of public HBs went out and purchased PRIVATE HBs at very high prices. By acquiring the private HB, the backlog was also acquired which management knew would enhance gross reported comparable results for at least six to twelve months, regardless of how much the acquistion leveraged the balance sheet or potentially damaged the business in the long run.
The issue is whether those acquisitions were made for the benefit of shareholders or window dress performance for six to twelve months after insiders in the industry sold a record amount of shares?
It is interesting, look at the timing of the acquisitions(just as the industry is starting to slow), the timing of insider selling, and the comments of managements at the time. The funny thing is that almost every HB had to consistently revise their guidance downward for all of last year and now into this year. And analysts seemed to go along for the ride. Now some HBs are so financially squeezed they are going out to borrow hundreds of millions of dollars when they can't even meet current interest obligations. The analyst's firms are likely to make tens of millions in commissions raising the capital at the expense of shareholders.
Conspiracy or coincidence?...you be the judge.
Does the nature and extent of insider behavior(selling shares) match the public discolsures? Do what I say not what I do?
The above does not apply to all HBs.
Only time will tell which ones. Maybe?
Anonymous said...
BusinessWeek DECEMBER 19, 2005
Bubble, Bubble -- Then Trouble
Is the chill in once-red-hot Loudoun County, Va., a portent of what's ahead?
Psssssfffffft. That's the sound of the air finally leaking from the real estate bubble in Loudoun County, Va. Since 2000 it's been the nation's fastest-growing county, where eager homebuyers always seemed to outnumber happy sellers. Until now. Advertisement
Bob Semmens, a 60-year-old retired pressman, has heard that sound. After he offered up his 3,000-square-foot colonial, with three acres and a swimming pool, in early July for $759,000, he sat back to wait for the frenzied offers. A year before, houses had remained on the market for just 20 days and were snapped up in bidding wars. But "very few people were even coming out to look," Semmens recalls. After four months, he was about to take the house off the market until next spring. But then he struck a deal -- for $620,000, an 18% price cut. Semmens rues his bad timing: "Just at the time I was getting the house on the market, everything really started to slow down."
By October, agents had 2,908 existing Loudoun houses on the market, an increase of 127% over a year earlier. The average time on the market had climbed 62%, to 42 days, since the fall of '04. And in just two months, from August to October, the median sales price for houses dropped from $506,100 to $480,000. In kitchens and coffee shops from Purcellville to Leesburg, anxious homeowners swap stories about a market rapidly going soft: The real estate agent who gets 10 to 15 e-mails a day from developers now offering price cuts of $10,000 or more to move new houses. The sign installer who's putting up three "For Sale" signs for every two that he takes down.
What's happening in Loudoun is a rapid shift in psychology -- a classic sign of a market turn. The buoyant optimism that fueled speculation and expectations of ever-rising prices is now succumbing to the fear of being left standing when the music stops. Real estate, the hottest play of the century in Loudoun, is rapidly cooling.
The same signs of a slowing market can be seen in hot spots across the country, from Boston and Miami to Phoenix, Las Vegas, and San Diego. Nationwide, a leading indicator for housing -- sales that are pending but not completed -- declined 3.2% in October from September, the National Association of Realtors reported on Dec. 6. Mortgage rates, while still low, have edged up almost half a percentage point from a year ago, to 6.26%, according to Freddie Mac's weekly survey.
Many other overheated areas could suffer even larger price drops than Loudoun County. Some, like Boston, lack the rapid growth in jobs to support rising prices. In Phoenix, high prices and cheap land have sparked a construction boom that's beginning to deflate the bubble. Other areas, such as Las Vegas and Florida cities like Miami, have seen rampant speculation. Such buying not only drives demand but "feeds the expectations of households that are not speculating," says David Stiff, chief economist of Fiserv CSW Inc., a housing data company. "If a significant portion of demand is speculative, that can evaporate very quickly."
Anonymous said...
Front Page Of Today's NY Times
News Analysis
Crisis Looms in Market for Mortgages
By GRETCHEN MORGENSON
Published: March 11, 2007
On March 1, a Wall Street analyst at Bear Stearns wrote an upbeat report on a company that specializes in making mortgages to cash-poor homebuyers. The company, New Century Financial, had already disclosed that a growing number of borrowers were defaulting, and its stock, at around $15, had lost half its value in three weeks.
What happened next seems all too familiar to investors who bought technology stocks in 2000 at the breathless urging of Wall Street analysts. Last week, New Century said it would stop making loans and needed emergency financing to survive. The stock collapsed to $3.21.
The analyst’s untimely call, coupled with a failure among other Wall Street institutions to identify problems in the home mortgage market, isn’t the only familiar ring to investors who watched the technology stock bubble burst precisely seven years ago.
***************************************************
You can read the entire article here:
http://www.nytimes.com/2007/03/11/business/11mortgage.html?hp
Anonymous said...
Do you think it possible that there will be an excess of funds available for prime borrowers now? Monies that were going to sub prime borrowers will have to go somewhere.
Will we be seeing an oversupply of funds available thereby driving interest rates down?
Not that there won't always be ways for someone to obtain creative "loose" financing. It just won't be as common.
Anonymous said...
one of two things:
(1) end of the world; hard landing; bank failures
(2) slowdown; plateau; soft landing
No one and I mean no one is predicting a quick turnaround. Which seems odd because we have etremely low unemployment, record corporate profits, rising incomes, falling interest rates, etc.
They way the stock market works is that when everyone is leaning the same way, the stock moves in the opposite direction.
Weight Master said...
Thanks for commenting on my site. I don't know much about this kind of stuff; so I'll probably sound stupid, but it's all a cycle. Down far a while and then back.